Samsung Electronics' Third-Quarter Operating Profit Soars, But Falls Short of Expectations - What Does This Mean for Investors?
Samsung Electronics, the world's largest memory chip, smartphone, and TV maker, announced a nearly four-fold jump in operating profit for the third quarter. However, the tech giant fell short of analysts' estimates, leading to a rare apology for lagging behind rivals in the booming AI chip market.
Despite estimating an operating profit of 9.1 trillion won ($6.78 billion) for the quarter, compared to a 10.3 trillion won LSEG SmartEstimate, Samsung's share price dropped by 1.2%. This decline comes as the company faces increased competition in both conventional and advanced chips.
The chip market is seeing a recovery, driven by high-margin chips used in AI servers. However, Samsung has been trailing behind SK Hynix in supplying high-bandwidth memory (HBM) chips to AI leader Nvidia, causing concerns about its technical competitiveness.
In response to these challenges, Young Hyun Jun, Vice Chairman of Samsung Electronics, acknowledged the crisis facing the company and pledged to focus on enhancing long-term technological competitiveness.
Earnings in Samsung's memory chip business declined due to increased supplies from Chinese chip rivals and adjustments in mobile customer inventories. The demand for commodity chips used in PCs and smartphones remains lackluster, which is affecting Samsung more than its competitors.
In May, Samsung replaced the chief of its semiconductor division in an effort to address the "chip crisis." The company also reported a delay in sales of its high-end HBM3E chips to a major customer, adding to its challenges.
In conclusion, Samsung's performance in the chip market and its future outlook have implications for investors. As the company navigates through increased competition and adjusts its strategies to enhance competitiveness, investors should closely monitor its progress to make informed decisions about their portfolios.